Recency Bias

Recency Bias is a cognitive bias where individuals prioritize recent information or experiences over older ones when making decisions. In the context of trading, this can lead to skewed perceptions of market trends, causing traders to overemphasize recent price movements rather than considering long-term data. This bias can result in impulsive decisions, such as buying during a peak or selling during a dip, as recent events disproportionately influence judgment. Understanding and mitigating recency bias is important for traders to make balanced and rational decisions that align with broader market analysis.